Benchmarking and Rating of Private Commercial Banks of Bangladesh Through CAMELS Components
Abstract
The banking sector of Bangladesh is becoming more complicated than before. Ensuring the financial stability of the economy, monitoring, supervision, and continuous performance evaluation of the banking sector are compulsory. The present study, therefore, is an attempt to evaluate and compare the performance of our banks. One of the most effective supervisory techniques, CAMELS rating system has been used to benchmark and rate the banks based on their performance. In this study, 21 private commercial banks (PCBs) have been chosen as samples to meet the purpose of the study. Data for analysis has been collected from the banks’ annual reports for the period of 2008 to 2018. The result shows that none of the banks could achieve a 'strong' position, and only SEBL was able to secure a ‘satisfactory’ mark. Unfortunately, AB bank was rated "marginal" in the composite rating, which is the lowest rating among the sample banks. Hence, AB bank needs to develop reform and follow-up programs as soon as possible to avoid financial failure.
References
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Moudud-Ul-Huq, S. (2017). Performance of banking industry in Bangladesh: Insights of CAMEL rating. International Journal of Financial Engineering, 4(02n03), 1750006.
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Masngut, M., & Rahman, A. (2012). Financial distressed: detection model for Islamic banks. Business and Social Science Research Conference. Paris.
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Roman, A., & Şargu, A. C. (2013). Analyzing the financial soundness of the commercial banks in Romania: An approach based on the camels framework. Procedia Economics and Finance, 6, 703-712. Retrieved from https://www.sciencedirect.com/science/article/pii/S2212567113001925
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Sangmi, M., & Nazir, T. (2010). Analyzing financial performance of commercial banks in India: application of camel model. Pakistan Journal of Commerce and Social Sciences, 4(1), 40-55. Retrieved from https://www.econstor.eu/handle/10419/187999
Sarwar, A., & Asif, S. (2011). Safety and soundness of financial sector of Pakistan: CAMEL rating application. Interdisciplinary Journal of Contemporary Research in Business, 3(2), 624-630.
Shakara, M. A. B. (2012). Assess the performance of banks under CAMELS standards. Journal of Accounting and Financial Studies, 7(18), 134-154.
Suba, N. (2015). Financial performance analysis of selected public and private sector banks: a study through camel model. A Ph.D. Thesis in the Department of Commerce, Saurasthtra University, India.
Tzu, S. (2002). Translated by John Minford. The Art of War. Viking. Retrieved from https://www.jstor.org/stable/40244134
Venkatesh, D., & Suresh, C. (2014). Comparative Performance Evaluation of Selected Commercial Banks in Kingdom of Bahrain Using CAMELS Method. Available at SSRN 2418144. https://doi.org/10.2139/ssrn.2418144.
Yuksel, S., Dincer, H., & Hacioglu, U. (2015). CAMELS-based Determinants for the Credit Rating of Turkish Deposit Banks. International Journal of Finance & Banking Studies, 4(4), 1.Retrived from https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/363
Annual Report of Bangladesh Bank (2018-19). Retrieved from https://bb.org.bd/pub/annual/anreport/ar1819/index1819.php
Babar, H. Z., & Zeb, G. (2011). Camels rating system for the banking industry in Pakistan: does the CAMELS system provide a similar rating as PACRA system in assessing the performance of banks in Pakistan? (Master’s Thesis). Umea School of Business, Sweden. Retrieved from https://www.semanticscholar.org/paper/Camels-rating-system-for-banking-industry-in-%3A-does-Babar-Zeb/1197fa888f16b438bfef813e7811e8c595bfba8b
Barker, D. & Holdsworth, D. (1993). The causes of bank failures in the 1980s. Federal Reserve Bank of New York, Research Paper No. 9325. Retrieved from https://ideas.repec.org/p/fip/fednrp/9325.html
Barr, R. S., Killgo, K. A., Siems, T. F., & Zimmel, S. (2002). Evaluating the productive efficiency and performance of US commercial banks. Managerial Finance, 28(8), 3-25. Retrieved from https://www.emerald.com/insight/content/doi/10.1108/03074350210767988/full/html
Cole, R. A., & Gunther, J. (1998). Predicting Bank Failures: A Comparison of On-And Off-Site Monitoring Systems. Journal of Financial Services Research, 13(2), pp. 103-117.https://link.springer.com/article/10.1023/A:1007954718966
Credit Rating Agency of Bangladesh Ltd. (2020). Retrieved from www.crab.com.bd
Dirheb, M. S. (2010). Bank Risk Assessment System (CAMELS). Iraqi Journal of Administrative Sciences, 11(15), 260-300.
Knights, D. & McCabe, D. (2006). A bridge too far? Consistent quality initiatives in financial services. The TQM Magazine, 8(5), 51-55.
Moudud-Ul-Huq, S. (2017). Performance of banking industry in Bangladesh: Insights of CAMEL rating. International Journal of Financial Engineering, 4(02n03), 1750006.
Majithiya, R & Pattani, A. (2010). Rating the performance of the bank through CAMELS model. Post Diploma thesis, Tolani Institute of Management Studies, India.
Masngut, M., & Rahman, A. (2012). Financial distressed: detection model for Islamic banks. Business and Social Science Research Conference. Paris.
Masood, O., Ghauri, S. M. K., & Aktan, B. (2016). Predicting Islamic banks performance through CAMELS rating model. Banks and Bank Systems, 11(3), 37-43. Retrieved from https://www.semanticscholar.org/paper/Predicting-Islamic-banks-performance-through-CAMELS-Masood-Ghauri/db5e9ebc85f641f623c3fdb5621c547707062bf7
Nurazi, R., & Evans, M. (2005). An Indonesian study of the use of camel(s) ratios as predictors of bank failure. Journal of Economic and Social Policy, 10(1), 6. Retrieved from https://www.researchgate.net/publication/37357823_An_Indonesian_Study_of_the_Use_of_CAMELS_Ratios_as_Predictors_of_Bank_Failure
Raju, B. H. (2017). Cost and Profit Efficiency of Bangladeshi Commercial Banks: A Stochastic Frontier Approach. International Journal of Economic Behavior and Organization, 5(6), 131-142. https://doi.org/10.2139/10.11648/j.ijebo.20170506.13
Rahman, Z., & Islam, S. (2018). Use of camel rating framework: a comparative performance evaluation of selected Bangladeshi private commercial banks. International Journal of Economics and Finance, 10(1). Retrieved from http://www.ccsenet.org/journal/index.php/ijef/article/view/71545
Roman, A., & Şargu, A. C. (2013). Analyzing the financial soundness of the commercial banks in Romania: An approach based on the camels framework. Procedia Economics and Finance, 6, 703-712. Retrieved from https://www.sciencedirect.com/science/article/pii/S2212567113001925
Sahajwala, R., & Van den Bergh, P. (2000). Supervisory Risk Assessment and Early Warning Systems. Basel Committee on Banking Supervision Working Papers, No. 4, Bank of International Settlements. Retrieved from https://www.researchgate.net/publication/4724551_Supervisory_risk_assessment_and_early_warning_systems
Sangmi, M., & Nazir, T. (2010). Analyzing financial performance of commercial banks in India: application of camel model. Pakistan Journal of Commerce and Social Sciences, 4(1), 40-55. Retrieved from https://www.econstor.eu/handle/10419/187999
Sarwar, A., & Asif, S. (2011). Safety and soundness of financial sector of Pakistan: CAMEL rating application. Interdisciplinary Journal of Contemporary Research in Business, 3(2), 624-630.
Shakara, M. A. B. (2012). Assess the performance of banks under CAMELS standards. Journal of Accounting and Financial Studies, 7(18), 134-154.
Suba, N. (2015). Financial performance analysis of selected public and private sector banks: a study through camel model. A Ph.D. Thesis in the Department of Commerce, Saurasthtra University, India.
Tzu, S. (2002). Translated by John Minford. The Art of War. Viking. Retrieved from https://www.jstor.org/stable/40244134
Venkatesh, D., & Suresh, C. (2014). Comparative Performance Evaluation of Selected Commercial Banks in Kingdom of Bahrain Using CAMELS Method. Available at SSRN 2418144. https://doi.org/10.2139/ssrn.2418144.
Yuksel, S., Dincer, H., & Hacioglu, U. (2015). CAMELS-based Determinants for the Credit Rating of Turkish Deposit Banks. International Journal of Finance & Banking Studies, 4(4), 1.Retrived from https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/363
Published
2020-09-26
How to Cite
Haq, A. H. M. Z., & Nasrin, H. (2020). Benchmarking and Rating of Private Commercial Banks of Bangladesh Through CAMELS Components. Bangladesh Journal of Multidisciplinary Scientific Research, 2(2), 40-49. https://doi.org/10.46281/bjmsr.v2i2.783
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Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2020 A H M Ziaul Haq, Hosnay Nasrin
This work is licensed under a Creative Commons Attribution 4.0 International License.
